Search Neutralityhttp://www.searchneutrality.org
Tue, 09 Jun 2015 23:05:23 +0000enhourly1http://wordpress.org/?v=3.3.2An Analysis of Google’s Public Response to the EC’s Formal Chargeshttp://www.searchneutrality.org/google/analysis_of_google_public_so_response
http://www.searchneutrality.org/google/analysis_of_google_public_so_response#commentsTue, 09 Jun 2015 23:05:23 +0000foundemhttp://www.searchneutrality.org/?p=476It’s taken us a while to get around to it, but here is our analysis and rebuttal of Google’s public response to the European Commission’s Statement of Objections.

We welcome today’s announcement by Commissioner Vestager that she has issued a statement of objections to Google, which is a decisive step towards restoring the level playing field required for competition and innovation to thrive.

Foundem’s November 2009 Competition Complaint to the European Commission was the first to document Google’s insidious search manipulation practices and to highlight their devastating impact on competition, innovation, and consumer choice.

Google is not just a monopoly; it is probably the most powerful monopoly in history. As the gatekeeper to the Internet, Google plays a decisive role in determining what the vast majority of us read, use, and purchase online. Today’s announcement isn’t about the potential size of any eventual fine; it is about ending Google’s ability to manipulate its unprecedented power to its own financial ends and to the detriment of consumers and innovation.

As the company that first brought Google’s anti-competitive search manipulation practices to the attention of regulators on both sides of the Atlantic, Foundem is uniquely placed to shed light on the vital background and context of the ensuing Google investigations. To this end, we are today publishing a Timeline of some of the significant events that brought Google to this point.

We very much hope that you will find the time to read it, because it unambiguously demonstrates that all of the Commission’s key arguments for adopting Google’s proposals are erroneous. More importantly, it shows that these arguments directly contradict the fundamental conclusions of the Commission’s own Preliminary Assessment: having correctly concluded in March 2013 that Paid Search traffic “cannot be a substitute” for the free, natural search traffic Google is illegally diverting, the Commission is now proposing to do precisely that.

Our Response also reveals that many of the spurious arguments the Commission has been making in defence of Google’s proposals (including many of those in your 11 June 2014 letter to your fellow Commissioners) have been adopted from Google arguments and submissions that the Commission seems to have made no attempt to validate. As we demonstrate, had the Commission sought such validation, the fatal flaws in these arguments would have been revealed some time ago. For example, contrary to the Commission’s claims, the proposed Paid Rival Links will consume the majority of rivals’ profits; will not be selected according to "relevance", "merit", or "quality"; will not be less expensive than existing advertisements; will not ensure that innovative new entrants can participate on non-disadvantageous terms; and most certainly will generate billions of dollars of additional revenue for Google that will come at the direct expense of the European businesses and consumers the Commission is duty bound to protect.

For you to continue to claim that auction-based Paid Rival Links are a substitute for the free, natural search traffic Google is anti-competitively diverting, you would now need not only to argue against the overwhelming evidence and analyses from Complainants, market participants, and consumer groups, you would also need to argue against your own DG—directly contradicting the fundamental conclusions of its Preliminary Assessment. Clearly, this is not a sustainable position—particularly in a case with such far-reaching and potentially catastrophic consequences.

In February, you announced your determination to accept Google’s proposals, despite overwhelming and unprecedented opposition to them from all of the parties they are ostensibly intended to help. Whatever sequence of events led you to accept Google’s misleading arguments without displaying any of the healthy scepticism that would normally be applied to “evidence” from a defendant in a competition case, we trust thatthe attached comprehensive rebuttal of these arguments will persuade you to think again and change course. If not, the future of the European digital economy may well depend on the acumen and resolve of your fellow Commissioners.

]]>http://www.searchneutrality.org/google/open-letter-to-almunia-july-2014/feed0Letter to Commissioner Almunia and the College of Commissionershttp://www.searchneutrality.org/google/letter-to-almunia-and-college-of-commissioners
http://www.searchneutrality.org/google/letter-to-almunia-and-college-of-commissioners#commentsWed, 12 Mar 2014 09:44:44 +0000foundemhttp://www.searchneutrality.org/?p=417The following letter was sent to Commissioner Almunia, President Barroso, and the College of Commissioners on 11 March 2014:

Dear Commissioner Almunia,

CC: Commissioners of the College and the President of the Commission

As the company whose November 2009 Competition Complaint first brought Google’s search manipulation practices to the Commission’s attention, we were troubled by some of your statements recorded in the minutes of the 2075th meeting of the Commission (held on 12 February 2014 and published on the 25 February)[1].

In response to questions about how Google’s proposed transition from natural, relevance-based search results to a pay-for-placement, auction-based system could hope to restore a level playing field or ensure access to innovative new entrants, the minutes record the following:

"As regards the importance of ensuring that SMEs could enter specialised online search markets, Mr ALMUNIA cited a number of technical parameters of the auction system which would ensure that this type of company would have access on non-disadvantageous terms and that the same arrangements, with or without fees, would be applied to both Google’s services and those of its competitors.” (Emphasis added)

If these official minutes provide an accurate account of the exchange, then we must respectfully point out that your answer to this crucial question was misleading on both counts.

First, as anyone who has studied Google’s proposals could readily confirm, Google’s services are not subject to “the same arrangements” as those of its competitors. As you must be aware, under Google’s proposals, only Google’s rivals would pay for placement in Google’s Universal Search box. Google would pay nothing; it would continue to insert links to its own services (together with monetised links derived from those services) in prime positions and entirely free of charge in all cases. In other words, Google would remain the sole beneficiary of the traffic it anti-competitively hijacks (diverts) from rivals, and would now also become the main beneficiary of any traffic it sends to them. If the Commission were to adopt these proposals, Google would gain sole possession of the free, natural search traffic that has hitherto fuelled the Internet revolution, and the Commission will have unwittingly granted Google a five year mandate to increase substantially the anti-competitive advantage Google already affords its own, often inferior, vertical search services.

Second, the proposed auction system does not contain any technical parameters that ensure “non-disadvantageous terms” for innovative SMEs[2]; in fact, the minimum traffic threshold alone would almost entirely exclude new entrants.

As the overwhelming consensus from the two previous market tests made clear, the adoption of Google’s proposals would cause additional grave and irreparable harm to hundreds of European businesses and millions of European consumers.

Google’s proposals offer nothing to end the search manipulation practices it was tasked with remedying, and nothing to restore competition to the vertical search domains that these anti-competitive practices have already devastated, such as product price comparison. But, remarkably, Google’s proposed transition from free, relevance-based listings to pay-for-placement listings for all services except Google’s own introduces an entirely new form of abuse that will, if adopted, directly destroy competition in many verticals that have not yet been devastated, such as travel search, financial search, property search, and job search. As used to be the case with product price comparison, these are currently innovative and highly profitable industries, employing many thousands of people and contributing many millions in tax revenues across Europe. That most of these businesses are currently unaware of the damage that is about to be inflicted on them is not surprising; who could have anticipated that the Commission might allow a dominant company to settle a competition case by substantially increasing the anti-competitive abuse it had been instructed to remedy?

If Google’s proposals were adopted, consumers would not only be harmed by the ensuing lack of competition and consumer choice, they would also be directly and immediately harmed by the transition from relevance-based ranking to auction-based pay-for-placement. In what might be the mother of all unintended consequences, this transition would all but eradicate the considerable value that vertical search services provide to consumers; services that direct users to merchants with the best prices or products cannot compete in an auction against rivals that direct users to merchants that pay them the most. Not surprisingly, studies have already shown that the recent transition of Google’s own product price comparison service from relevance-based-placement to pay-for-placement has led directly to European consumers paying significantly higher prices for products purchased through this service[3].

It is difficult to imagine a Competition case where the stakes for consumers, businesses, and innovation could be any higher. As the gateway to the Internet, Google plays a decisive role in determining what the vast majority of us read, use, and purchase online. The importance of ending Google’s ability to manipulate this unprecedented power to its own anti-competitive ends cannot be overstated. It is no exaggeration to say that the hopes of a digital-led economic recovery may depend on the outcome of this case.

We are struggling to understand why you seem so determined to ignore the overwhelming empirical evidence and consensus of opinion from complainants, market participants, and consumer organisations. We urge you to reject Google’s proposals and pursue a Prohibition Decision that will end, rather than escalate, the abusive practices the Commission has identified.

Over the last several months, a strong consensus has emerged about the minimum standard of remedies that will be required to end the abusive search manipulation practices the Commission has identified. The straightforward and reasonable even-handed principle has already been widely endorsed by Complainants and consumer groups, and, if implemented, would immediately restore the unbiased level playing field that search engine users expect and that competition and innovation require.

As eleven Complainants wrote in an open letter to Commissioner Almunia last month:

“There are two equally important aspects to Google’s search manipulation practices: the systematic promotion of Google’s own services, and the systematic demotion or exclusion of its competitors’ services. Any effective remedies will require explicit commitments to end both aspects; remedying one without remedying the other would simply allow Google to recalibrate the un-remedied practice in order to achieve the same or equivalent anti-competitive effect.

Google’s strict adherence to the following overarching principle would ensure an end to both aspects of Google’s search manipulation practices:

Google must be even-handed. It must hold all services, including its own, to exactly the same standards, using exactly the same crawling, indexing, ranking, display, and penalty algorithms.”

The even-handed principle has also been endorsed by BEUC, the European consumer organisation representing the views of 39 national consumer organisations from across 30 European countries.

Remedies that implement the even-handed principle would, by definition, prohibit Google’s abusive search manipulation practices. They would be straightforward to define, implement, and monitor (for examples, see here and here), and would start acting to restore competition from the moment Google committed to them.

We will withhold final judgement on Google’s proposals until we have had time to analyse them in detail, but we and others will be looking to see how they measure up to the even-handed principle standard. The early signs are that Google’s proposals will fall far short of this minimum requirement.

Instead of promising to end its abusive practices, Google’s proposal seems to offer a half-hearted attempt to dilute their anti-competitive effects, by labelling Google’s own services and throwing in some token links to competitors’ services alongside them. Without robust guidelines that guarantee the placement, depth, prominence, and relevance of these links, and guarantee that the selection of competitors will be free from anti-competitive penalties and discrimination, neither measure will make a dent in Google’s ability to hijack the traffic and revenues of its rivals.

It is difficult to imagine a Competition case where the stakes for consumers and businesses could be any higher. As the gateway to the Internet, Google plays a decisive role in determining what the vast majority of us discover, read, use, and purchase online. The importance of ending Google’s ability to manipulate this unprecedented power to its own anti-competitive ends cannot be overstated. It is no stretch to say that the hopes of a digital-led economic recovery may depend on the outcome of this case.

]]>http://www.searchneutrality.org/google/market-test-of-google-proposals/feed0Open Letter to Vice-President Almunia from 11 Complainantshttp://www.searchneutrality.org/google/open-letter-to-almunia
http://www.searchneutrality.org/google/open-letter-to-almunia#commentsThu, 21 Mar 2013 08:00:34 +0000foundemhttp://www.searchneutrality.org/?p=359The following letter was sent to Vice-President Almunia on 21 March 2013:

Dear Vice-President Almunia,

RE: COMP/C-3/39.740 – Foundem / Google and associated cases

We are writing to express our common views on the European Commission’s ongoing settlement negotiations with Google. The Commission opened proceedings more than two years ago, and we are becoming increasingly concerned that effective and future-proof remedies might not emerge through settlement discussions alone.

The first point we would like to raise is that the anti-competitive impact of search manipulation far outweighs the Commission’s three other areas of concern regarding Google’s business practices. In addition to materially degrading the user experience and limiting consumer choice, Google’s search manipulation practices lay waste to entire classes of competitors in every sector where Google chooses to deploy them.

The second point we would like to raise is that there are two equally important aspects to Google’s search manipulation practices: the systematic promotion of Google’s own services, and the systematic demotion or exclusion of its competitors’ services. Any effective remedies will require explicit commitments to end both aspects; remedying one without remedying the other would simply allow Google to recalibrate the un-remedied practice in order to achieve the same or equivalent anti-competitive effect.

Thirdly, we are convinced that Google’s strict adherence to the following overarching principle would ensure an end to both aspects of Google’s search manipulation practices:

Google must be even-handed. It must hold all services, including its own, to exactly the same standards, using exactly the same crawling, indexing, ranking, display, and penalty algorithms.

We will respectfully withhold judgement on Google’s proposed commitments until we have seen them, but Google’s past behaviour suggests that it is unlikely to volunteer effective, future-proof remedies without being formally charged with infringement. Given this, and the fact that Google has exploited every delay to further entrench, extend, and escalate its anti-competitive activities, we urge the Commission to issue the Statement of Objections.

Yours sincerely,

Shivaun Raff,CEO and Co-Founder, Foundem

Helmut Verdenhalven,Director Government Relations, BDZV Federation of German Newspaper Publishers

Dr. h.c. Hans Biermann,Chief Executive Officer, Euro-Cities AG

Brent Thompson,Senior Vice President Government and Corporate Affairs, Expedia Inc.

]]>http://www.searchneutrality.org/google/open-letter-to-almunia/feed0Foundem’s Recent Letter to the FTChttp://www.searchneutrality.org/google/foundem-ftc-letter
http://www.searchneutrality.org/google/foundem-ftc-letter#commentsThu, 03 Jan 2013 13:30:16 +0000foundemhttp://www.searchneutrality.org/?p=331On December 31 2012, Foundem co-founders Adam and Shivaun Raff wrote to the FTC’s Commissioners and investigative team. The following is an excerpt from that letter:

We first came to you in May 2010 as an innovative vertical search company that had been deterred from entering the U.S. market by Google’s anticompetitive penalty and self-preferencing practices. We are writing to you now in response to recent reports that the FTC might conclude its antitrust investigation into Google without addressing these anticompetitive search manipulations. In our view, this would be a catastrophic mistake. It is no accident that search manipulation was the issue that sparked the U.S. and European investigations; its insidious, anticompetitive impact outweighs all of Google’s other anticompetitive practices by a considerable margin. While virtually undetectable to users, Google’s search manipulations lay waste to entire classes of competitors in every sector where Google chooses to deploy them.

Foundem is the company that first brought Google’s search manipulations to the attention of regulators on both sides of the Atlantic, and it has remained engaged with the ensuing investigations throughout. From this vantage point, we are concerned that the FTC’s reluctance to litigate against these abusive practices may stem more from misconceptions about the mechanics and financial incentives underlying the abuse than from the constraints of U.S. antitrust law.

In the familiar bricks-and-mortar world, Google’s anticompetitive behaviour would have been obvious to all. But, in the unfamiliar and seemingly impenetrable world of internet search, Google’s ability to get away with these practices has often depended on its ability to confuse, obfuscate, and intimidate.

…It is difficult to conceive of an antitrust case where the stakes for U.S. consumers and businesses could be any higher. Google has been dominant in the U.S. search and search advertising markets for more than a decade, and there is no sign of this changing anytime soon. As the gateway to the Internet, Google plays a decisive role in determining what the vast majority of Americans discover, read, use, and purchase online. The importance of deciding whether or not Google is allowed to manipulate this unparalleled and virtually unlimited power to its own financial ends cannot be overstated…

]]>http://www.searchneutrality.org/google/foundem-ftc-letter/feed0For Google, All Roads Lead to Remedieshttp://www.searchneutrality.org/google/all-roads-lead-to-remedies
http://www.searchneutrality.org/google/all-roads-lead-to-remedies#commentsMon, 03 Sep 2012 23:05:51 +0000foundemhttp://www.searchneutrality.org/?p=313In May this year, the European Commission issued Google with a public ultimatum. Keen for a "quick resolution" to the concerns it had identified during its eighteen-month antitrust investigation into Google’s business practices, Commissioner Almunia gave Google six weeks to propose "an outline of remedies", with a view to a negotiated settlement, or else face a formal “statement of objections and [the adoption of] a decision imposing fines and remedies.”

The main concern listed by the Commission was that of search manipulation: Google manipulating its search results to promote its own secondary services while demoting or excluding those of its competitors—a practice first described in Foundem’s Complaint to the Commission in November 2009.

By the end of July, Google had conceded enough ground to convince Commissioner Almunia to “proceed with technical meetings to explore the possibility of a settlement”. Note that the settlement procedure being offered to Google (under Article 9 of the EU Antitrust Regulations) can only be used in cases where the Commission’s investigation has already concluded (albeit provisionally) that an infringement has taken place.

We have now passed a crucial tipping point. From here, there are only two possible outcomes, and both involve binding remedies—either committed to voluntarily by Google through a settlement agreement or imposed on Google by an infringement decision. While the process can switch between these two paths at any time, both lead inexorably toward binding commitments designed to end Google’s anti-competitive practices. But, there is an important difference between the two paths: an infringement decision would offer greater assistance to those seeking compensation for past damage.

Google has been remarkably successful over the last several years. Its revenues have soared from $6 billion in 2005 to $37 billion in 2011. But, unbeknownst to its shareholders, Google’s increasingly anti-competitive practices have been quietly accruing billions of dollars of antitrust liabilities. It is impossible to know how many companies have been harmed or destroyed by these practices—it could be hundreds or even thousands—but whatever the number, the consequence of abuse on a grand scale is liabilities on a grand scale.

European businesses that have been harmed by Google’s anti-competitive practices would be able to rely on a formal infringement decision by the Commission when seeking compensation through their own courts. Without an infringement decision, many of these companies (lacking the substantial body of evidence that Foundem’s case brought to regulators) might hesitate or struggle to bring civil actions.

Google needs to reach a settlement with the Commission in order to avoid the tsunami of follow-on litigation that would surely follow an infringement decision. This unspoken need to avoid a guilty verdict at virtually any cost, together with the overwhelming evidence of Google’s anti-competitive practices currently locked behind closed doors, puts the Commission in a far stronger bargaining position than many commentators realise. Anyone suggesting that Google will get away with superficial remedies (a clear and conspicuous label here, a more transparent FAQ there) is almost certainly mistaken.

Today we are publishing a proposed framework of remedies. We suggest that these remedies are reasonable, practical to implement and enforce, and go a long way toward ending many of the abusive practices identified by the Commission’s investigation.

Whatever the final form of the remedies adopted by the Commission, they are likely to have a dramatic impact on Google’s power to stack the deck in its own favour. The success or failure of Google’s secondary services, in travel search, price comparison, social networking, and so on, will once more depend on its ability to innovate, rather than on its ability to hijack the traffic of its competitors.

With the right remedies, users themselves should not see much immediate difference—just a quiet return to the Google search results of old. The richness, variety, and relevance of users’ search results will improve, and the rate of innovation in areas long suppressed by Google’s anti-competitive practices will increase. The potential for appropriate remedies to restore competition and rekindle the growth of the digital economy cannot be overestimated.